Brinkmanship in the Debt Ceiling Debate: The Path to Making a Deal

July 13, 2011

By ABCNEWS.COM

ABC News’ Devin Dwyer ( @devindwyer) reports: If you believe all the rhetoric from the past 24 hours, prospects of a deal to stave off U.S. default by the Aug. 2 deadline have dwindled from slim to none.

But leading experts on negotiation tactics say lawmakers’ brinkmanship, while alarming, is actually a healthy characteristic of high-stakes bargaining.

“They are like Asian business brokers,” said Michael Benoliel, director of the D.C.-based Center for Negotiation, likening congressional leaders to some of his international clients.

“It’s possible they could cut the deal in a week, two weeks, sometimes three weeks before the deadline,” he said. “But if you’re a negotiator cutting a deal before the deadline, and go to your boss and say, ‘I got a great deal,’ he will say, ‘No, you did not get a good deal because you did not wait until the very last moment.’”

Benoliel, who has advised major multi-national corporations on negotiation strategies, said that in this case the “bosses” are the leaders’ various political constituencies -- and the result of trying to please them too soon is causing temporary gridlock.

“There is a sense that people don’t put everything on the table until late in the game,” he said.

The so-called “deadline effect” will eventually catalyze concession making, says G. Richard Shell, a professor at the University of Pennsylvania’s Wharton School of Business and author of “Bargaining for Advantage: Negotiations Strategies for Reasonable People.”

“It’s just like a chemical agent in liquid,” he said of the pressure deadlines put on people to compromise. “The brinkmanship makes us all hold our breath because there’s always a danger that these negotiations won’t come together in time. But most of the time in works out.”

President Obama and Republican leaders, House Speaker John Boehner and Senate Minority Leader Mitch McConnell, have agreed they will not allow the U.S. to default on its obligations. But have also suggested on separate occasions that the U.S. could still be headed towards just that.

“This is a classic game of chicken,” said Harvard Law School’s Robert Mnookin, author of “Bargaining with the Devil: When to Negotiate, When to Fight.”

Mnookin said leaders on both sides of the debt ceiling debate use their dramatic statements to create the impression that they’ve thrown the steering wheel out the window, forcing the other side to make a move to avert a crash. So what happens next?

“Usually in situations where it’s so conspicuous that both sides would be better off with various kinds of compromises deals are made,” he said. “But not always.”

What makes the current debt ceiling debate unique and particularly volatile, experts say, is that for some stakeholders the deadline effect is not in play: Many Republicans doubt the warnings from administration that Aug. 2 is a hard date for default.

“If the Aug. 2 deadline is seen as credible by a majority, with a solid reason behind it, then the parties will conclude their negotiations around it,” said Benoliel. “But if the other side believes it’s arbitrary, then not much will happen.”

Mnookin is less sanguine.

“Sometimes in a game of chicken, neither side blinks. Labor unions strike, state governments shutdown,” he said. “If a deal is possible, it won’t come until the 11th hour. It’s not going to be made early.”